30% Upside: Whole Foods Institutional Call Today at 11am ET $WFM

Takeaway:Join us for a review of our WFM Long thesis today on why we think shares have 30% upside.

***We are hosting a Flash Call at 11:00 AM ET to go through our LONG thesis for WFM. Contact sales@hedgeye.com for more information and access.

Whole Foods Founder John Mackey is taking back control of the company and has called for a slowing in store growth, focusing efforts now on costs and cash flow. This pivot for an industry leading growth company doesn’t happen often (think SBUX, MCD, TGT). It requires a period of revaluation and reset expectations. But it is also followed by significant outperformance if done correctly. That’s the road ahead we see for WFM.

HEDGEYE OPINION

Whole Foods reported another disappointing quarter last week, but more importantly they laid out a new path forward for the company. We published a note last week that explained why cutting capex is exactly what they need to do in order to improve the performance of this company. With John Mackey back in charge, he is taking the bull by the horns and returning this company to its roots by focusing on the core Whole Foods consumer.

This first cut is deep, but they can go deeper once they work through sites that are already in development, cutting capex to only maintenance and other necessary expenditures. We have seen this story before, and will provide examples of companies that grew too fast into an increasingly competitive environment, getting ahead of their skis and falling on their face. Pulling back on growth capex for a couple of years will allow them to refine their current footprint and accelerate profitability.

The core Whole Foods consumer is still alive and well, and by no means do we believe that the Whole Foods brand will die in the face of conventional competition. We will lay out in detail how we anticipate their new way forward to unfold, including conversation on their capital expenditure plan, the focus on the core consumer and how category management will change the way they operate.

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